Buying a home can be confusing, especially if you have no idea what your realtor is talking about. Real estate agents deal with this lingo on a day to day basis and according to the National Association of Realtors, people are moving homes on average every 10 years.
How are homeowners supposed to understand certain terminology when they are not part of the industry or if this is your first time buying or selling a home? Do not fret, we have compiled a complete guide of real estate terms so that you can speak the language like a pro.
Appraisal: An appraisal is an unbiased, professional estimate of your home’s value. A licensed and certified appraiser creates a report after walking through your home, comparing it to other homes in the area and using market trends to determine your properties’ appraisal value.
Assessed Value: An assessment is conducted by a public tax assessor to determine the amount of city and state taxes you will pay on the property yearly.
Closing: Closing is the final stage of the selling or buying process. It is a lengthy meeting between the two parties where they fill out legal paperwork to officially transfer the ownership of the home.
Closing Cost: There are miscellaneous fees on top of the price of the home. The buyer should expect to pay the additional costs to cover the appraisal, title insurance, credit card, attorney and processing fees. According to Zillow, buyers should budget for an amount that is 1% to 5% of the home’s purchase price.
Contingencies: This term refers to particular conditions that are written into the contract that must be met before closing the real estate transaction. Contingencies can rely on the sale of the buyer’s current home, the approval of the buyer’s loan or the home inspection, ensuring there are no serious defects.
Due Diligence: A due diligence period is an agreed upon window of time for the buyer to conduct inspections and access the neighborhood before finalizing the sale. This period allows the buyer to fully understand what they are buying. If the buyer does not like what they find, they have this grace period to terminate the offer without any penalty.
Earnest Money: Earnest money is an amount of money put down by a buyer to show that they are serious about purchasing the home. This is sometimes referred to as “good faith deposit” and is applied to the buyer’s down payment or closing cost if the sale works out. An earnest money deposit is not required, but it can increase your likelihood of securing the property.
Escrow: When a home is in escrow, a neutral third party is holding onto the funds during the final transaction. The escrow account is funded by the buyer’s mortgage payment. This protects both parties by ensuring that everyone will get that they are due at essentially the same time. During the closing of escrow, the purchase is completed and the funds will be distributed to the proper party.
Equity: Equity is the difference between your home's market value and the amount you owe on the mortgage. The amount leftover is the amount of equity you have. Say the market value of your home is $300,000 and you owe $50,000 on the mortgage. Your equity, and what you will take home after the sale, is $250,000.
Mortgage: A home mortgage is a loan given by the bank or mortgage company for the purchase of your home. These loans have fixed or floating interest rates and span from three to 30 years. After you pay off your mortgage, you will receive the title of your home.
Offer: When a buyer is ready to purchase a house, they will make a formal offer on it. The seller may accept the offer, reject it or make a counteroffer.
Under Contract: When a home is under contract, a buyer has made an offer, and the seller accepted it, but the sale has not been finalized. Before the sale can be finalized, all contingencies must be met.
These terms can help you understand all the stages of the home buying process. Whether you are buying or selling, Holland Homes Sales is here to answer any and all of your realty questions. Contact us and begin your exciting home journey!